EMERGING MARKETS-Latam currencies slide as China worries dent risk appetite

BY Reuters | ECONOMIC | 08/15/22 10:28 AM EDT
       By Susan Mathew
    Aug 15 (Reuters) - Brazil's real and Mexico's peso fell
against the dollar on Monday, tracking other emerging market
currencies as worries about China's economic growth dented risk
appetite, while Hungary's forint was set for its worst session
since May against the euro.
    The forint's 1.7% slide was triggered by rating
agency S&P lowering Hungary's credit rating outlook to negative
from stable.
    S&P said that external risks, including potential cuts to
European Union funds and reduced gas flows, could weigh on
Hungary's growth prospects, already pressured by surging
inflation and a fiscal adjustment to rein in the budget deficit.

    The forint has slumped more than 7% so far this year, far
underperforming other central and eastern European currencies. A
broader basket of emerging market currencies is
down about 4%.
    Global sentiment took a hit on Monday after weak retail
sales and factory activity in China raised worries about slowing
growth in the world's second largest economy, prompting its
central bank to cut a key lending rate to stimulate demand.
    This sent the safe-haven dollar rallying.
    "The first impression from the latest set of activity data
for July is that there are few signs of a strong rebound in the
(Chinese) economy," said Charlie Lay, FX and EM analyst at
Commerzbank.
    "Consumer sentiment is likely to remain fragile given
uncertainties over future outbreaks and lockdowns. Furthermore,
the economy is still battling with the property correction and
weak investment in general."
    China is a major destination for commodity exports from
resource-rich Latin America.
    Brazil's real lost 0.6%, after three weeks of gains.
Investors seemed to look past data showing economic activity
rose more than expected in June, helped by a service sector
rebound following the impact of the COVID-19 pandemic.

    Brazil stocks were down 1% as iron ore miner Vale
 dropped 3%.
    The miner was fined about 86.3 million reais ($16.82
million) after the country's comptroller general decided the
firm did not present truthful information on the conditions of
its Brumadinho tailings dam prior to a 2019 disaster.

    Mexico's peso lost 0.1%, breaking a five-session
winning streak.
    Most other Latin American markets were closed for local
holidays.

    Key Latin American stock indexes and currencies at 1406 GMT:
   Stock indexes            Latest    Daily %
                                      change
 MSCI Emerging Markets       1013.51    -0.33

 MSCI LatAm                  2241.98    -0.76

 Brazil Bovespa            111628.75    -1.01

 Mexico IPC                 48688.38    -0.34

       Currencies           Latest    Daily %
                                      change
 Brazil real                  5.1035    -0.60

 Mexico peso                 19.8870    -0.29

 Peru sol                      3.849     0.00


 (Reporting by Susan Mathew in Bengaluru; Editing by Kirsten
Donovan)

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